White House shifts on inversions as Dems amp up pressure — IRS gets high marks on Obamacare data transfer — Walgreens won’t invert, HQ will remain in U.S.

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WHITE HOUSE SHIFTS ON INVERSIONS AS DEMS AMP UP PRESSURE. August is usually slow in Washington, but the flurry of action to try to stop companies from moving their tax base overseas has been heating up. Treasury Secretary Jack Lew took a small but significant step yesterday when he revealed that the White House is now considering potential executive actions to prevent inversions. He made sure to emphasize that the best solution would be for Congress to write legislation to prevent companies from shifting their headquarters overseas for tax purposes. Lew spoke with The New York Times: http://nyti.ms/1qVyXWO

“The best way to address inversions would be through comprehensive business tax reform that includes specific anti-inversion provisions, but we cannot wait to act while inversions erode our corporate tax base,” the spokesperson said over e-mail. “Treasury is reviewing a broad range of authorities for possible administrative actions that could limit the ability of companies to engage in inversions, as well as approaches that could meaningfully reduce the tax benefits after inversions take place, to at least provide a partial fix.”

That they are even considering taking action is significant, but it is still unclear what the legal limitations are for executive intervention. Experts and lawmakers have been split on the issue since inversions started to heat up this summer. The White House has been under increasing pressure to take action and holding out for Congress could leave the administration looking weak or uninterested.

The focus now will be on what options the White House thinks they have. Some speculate they could focus on tightening rules for interest expense deductions. Preventing companies from stripping earnings from their U.S. subsidiaries could gain bipartisan support — especially given that Republican Sen. Charles Grassley floated it in a hearing late last month, though it may antagonize Republicans if taken via executive action. For more, read our Kelsey Snell’s story here: http://politico.pro/1stkChC

IRS GETS HIGH MARKS ON OBAMACARE DATA TRANSFER. Your Morning Tax-er and Kim Dixon have the story: “The Internal Revenue Service got a virtual A for its role in verifying income for Obamacare’s tax credits in a report card by an inspector general report released on Tuesday, though some trouble spots may lie ahead as the government rolls out the tax credits, according to analysts. The IRS is providing correct information nearly 100 percent of the time about individual income and family size to Obamacare’s health insurance exchanges, according to the Treasury Inspector General for Tax Administration report. ... Still, there are plenty of potential problems ahead, particularly for taxpayers with income discrepancies from year to year and for Health and Human Services, which will have to verify the data.” http://politico.pro/1ASwLlb

REPORT: WALGREENS WON’T INVERT, HQ WILL REMAIN IN THE US. Sky News has the story: “One of America's biggest corporate names is poised to bow to intense US political pressure by retaining its headquarters in the US even as it secures a full takeover of Boots, Britain's biggest pharmacy chain. Sky News can exclusively reveal that Walgreens, the giant drug-stores group, will announce as soon as Wednesday that it plans to acquire the remaining 55% of Alliance Boots that it does not already own in a deal costing in the region of £5bn.”

“However, sources on both sides of the Atlantic said that Walgreens is likely to disclose as part of its announcement that it intends to remain a US-domiciled company rather than pursuing a so-called tax inversion which would involve moving its corporate headquarters to the UK or Switzerland.” http://bit.ly/1s8OOku

IS OBAMA FLIP-FLOPPING ON INVERSIONS? Bloomberg’s Zach Mider reports that while Obama publicly denounces corporations that expatriate, his administration helped one $20 billion American company relocate overseas. “As part of the bailout of the auto industry in 2009, Obama’s Treasury Department authorized spending $1.7 billion of government funds to get a bankrupt Michigan parts-maker back on its feet — as a British company. While executives continue to run Delphi Automotive Plc from a Detroit suburb, the paper headquarters in England potentially reduces the company’s U.S. tax bill by as much as $110 million a year.” http://bloom.bg/1qWlpu4

MISSOURI TRANSPORTATION SALES TAX SHOT DOWN. “Missouri voters defeated a multi-billion-dollar sales tax hike for transportation Tuesday, a significant setback for highway officials who have warned that the state soon won't have enough money to repair all of its aging roads and bridges,” The Associated Press reports. http://bit.ly/1p9ma0n

A BIKE TRIP IN THE SOUTH OF FRANCE: THE INVERSION CONNECTION. The Wall Street Journal breaks down how tax inversions become the hottest trend in M&A — and it starts with a bike ride (and oh so many bicycling puns): “In 2010, a group of lawyers from New York and London took a bike trip through the rolling countryside of Southern France, and helped set the wheels in motion on the hottest new trend in mergers and acquisitions,” WSJ reports. “Part holiday, part corporate offsite, the peloton brought together top tax and M&A lawyers from Skadden, Arps, Slate, Meagher & Flom LLP. Deal making was in the doldrums, but, in tandem, some of the lawyers figured out a plan that could persuade clients to take the brakes off M&A.”

“Four years later, so-called ‘tax inversions’ have been a major driver in cross-border deal making, accounting for 66% of announced deals this year, according to Thomson Reuters. That is up from just 1% in 2011. Skadden is at the front of the pack, involved in a whopping 78% of inversions by deal value since 2011, according to Thomson Reuters data.” Read on, and see if you can spot more bike puns here: http://on.wsj.com/1sqTYWF

MICKEY MOUSE PLANS TO STAY PUT. CNBC reports that Walt Disney Co CEO Bob Iger says the company isn’t going to move outside the country for tax purposes. “Although the company battles with a very high corporate tax rate he ruled out doing an inversion, adding that he doesn't think threatening to relocate overseas is the right approach. ‘I don't really think moving Walt Disney Company outside the U.S in order to save taxes is an option, nor do I think it would be the right thing to do for the company or for this country,’ Iger told CNBC Tuesday.” http://cnb.cx/1y2TRBi

NYT: AN IDEAL INVERSION SOLUTION, OR AT LEAST CONGRESS. The New York Times editorial board takes on the tax issue of the summer: inversions. “An ideal solution would be for American and European leaders to forswear competition based on relative tax advantages as bad for everyone. Unfortunately, that would require a level of cooperation and leadership that is nowhere to be found. In the meantime, Congress could stop today’s most egregious tax avoidance tactics if a majority of members wanted to.” http://nyti.ms/1qVm3Is

But if you’ll recall, Tax Analysts’ Marty Sullivan wrote the other day that people shouldn’t count on any tax reform proposals coming out of Congress to curb inversions — and he knocked the “conventional wisdom” in the press and on Capitol Hill that “inversions occur because Congress has failed to enact tax reform." http://bit.ly/1tOJYcD

— Grace Perez-Navarro, deputy director of the OECD's Centre for Tax Policy and Administration, writes a letter in The Washington Times, calling out Richard Rahn’s column “When money mischief goes global” as “fundamentally incorrect about the common reporting standard for the automatic exchange of financial account information for tax purposes published last week” by the OECD. http://bit.ly/1zSDD0m